What the collapse of a major bank says about the rise of Kenya’s powerful social media spaces

Shut down.
Shut down.
Image: REUTERS/Thomas Mukoya
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It began with a rumor. Late on the night of Sunday, Apr. 3, 2016, messages tore through Kenya’s numerous WhatsApp groups that one of the country’s best known mid-sized banks–Chase Bank–was in trouble.

By Tuesday, Apr. 5, the news leaped onto Twitter. User Mumbi Seraki (@Mumbi Kenya) tweeted ‘After Imperial, CBK focused ON forensic audits and found a similar ALLEGED FRAUD at Chase Bank where close to 15b is missing from the books.’ Each of the 14 tweets responding to Seraki demanded evidence and called on her to prove her allegations, with some going as far as inviting Chase Bank to prosecute Seraki for allegedly defaming the bank. “

Even though Seraki is a well-known personality, the initial instinct was to disbelieve her because Chase Bank was no small outlier bank. Unaffiliated with the US bank of the same name, the Kenyan bank was incorporated in 1995 as mid-sized bank primarily serving low-income earners, small and medium-sized enterprises and other underserved communities. It had one of the largest sharia compliant banking units in the region and served many businesses in Kenya that traded primarily with the Middle East. At its peak, Chase Bank was one of the most successful indigenous banks in the largest banking sector in East Africa.

Some Facebook posts alleged that major depositors heard about the Chase Bank rumors prior to the Twitter revelations and immediately withdrew their money. For the majority of customers, however, the first sign that something truly was wrong didn’t come until Seraki’s tweet on Apr. 5. The Chase Bank social media accounts were running as normal. Users frantically tagged the bank in Seraki’s tweets, urging them to respond. The people managing the bank’s social media urged customers to ignore such rumors: “that information is completely false and we urge the public to ignore it” The bank drafted and issued a press statement asserting that Chase Bank was ‘strong, sound and transparent.’

Forty-eight hours later, on Apr. 7, 2016 Chase Bank was under receivership—taken over by the Central Bank— with all accounts frozen, and the CEO and managing director suspended pending investigations.

People read a notice from the Central Bank of Kenya taped to the closed entrance of a Chase Bank branch, after the bank was put in receivership in Nairobi Kenya in this April 8, 2016 file photo.
Image: REUTERS/Siegfried Modola/File

Who tried to kill Chase Bank?

According to the Central Bank, social media was definitely an accessory to the attempted murder. In the Apr. 7 press release announcing the receivership, the CBK argued ‘Chase Bank Limited experienced liquidity difficulties, following inaccurate social media reports and the stepping aside of two of its directors.’

The CBK argued that the social media rumors triggered a bank run that ultimately tipped the scales and led to the bank’s collapse. It’s a charge that many of Kenya’s best-known social media users and experts vehemently deny. Social media doesn’t cause bank collapses, they say, corruption and fraud do.

The truth, as always, is probably somewhere in the middle. Like all banks, Chase didn’t physically have all the money in its accounting books. Chase Bank was [also] already in a bad way, long before the story broke on social media, having overextended itself in a highly risky way, particularly by extending most of its loan book to insiders (staff members and directors). This meant that not only was the money being given away but it was being given away at concessionary rates.

The common denominator in these seemingly irreconcilable positions on what exactly triggered the collapse of Chase Bank is they all see a connection between the advent of social media and the speed at which the bank collapsed. Chase Bank broke Kenyan banking laws but was already weak. Had Chase Bank had a better financial structure there is every reason to believe that, despite the bank run, the bank’s collapse would not have happened so quickly and so thoroughly.

Image for article titled What the collapse of a major bank says about the rise of Kenya’s powerful social media spaces
Image: Zed Books

This story of Chase Bank is part of the broader ten-year narrative in which digital spaces generally, and social media especially, emerge as one of the most potent political spaces in Kenya. The virtual spaces created through Twitter, WhatsApp, Facebook, and other platforms are today a collective powerful force that institutions have been forced to reckon with.

For Kenyans, social media is not simply a space to post pictures of new clothes or delicious food, or to have conversations about sports. It is a space where some of the most exuberant and insightful political conversations are happening. Digital spaces have been used to conceive of world-changing technology, to plan and execute protests, to shape academic discourse, as well as to shift political conversations in ways that include and exclude power. Social media especially has become a weathervane of the political winds in Kenya, giving more space to voices that are ordinarily left out of political conversations offline.

However, it’s not all rosy. Social media platforms can be toxic spaces that replicate offline harm. Violent acts are encouraged and distributed on these platforms, such as politicians threatening physical violence against their opponents. Video recordings of physical and sexual assaults, particularly against women, have gone viral—disseminated by thousands of people—on Kenyan social media.

Ethnic chauvinism is frequently played and replayed, especially around elections. Abuse leveled at individuals and institutions is prevalent. Rules around privacy and against defamation of character have been ignored. Paid shills for specific political voices have bought followers and built pulpits from which those followers are bullied and whipped into a frenzy for their political paymasters, crowding out more meaningful discussion.

Analogue politics. Digital democracy.

If social media can bring down a bank, can it bring down a government? Can a tweet launch a revolution? Can a digital election finally deliver an uneventful election in Kenya? These were perhaps the questions the Kenyan government was asking itself watching the Chase Bank saga unfold. Considerably rattled, as if they reasoned by analogy that they were also on shaky ground, many government-friendly bloggers and social media users pushed out a patriotic counter-narrative to reassure the undecided.

The hashtag #IStandWithChaseBank was created to encourage people to keep their deposits with the bank and have faith in its directors. It stank of desperation and the facts of the scenario hint at the absurdity of the push. Bank directors were private citizens deceiving depositors and regulators. Why should you keep your money with a bank led by people who were not patriotic enough not to steal from their clients? Wouldn’t patriotism demand accountability on behalf of depositors who were facing the threat of losing their homes, businesses and life savings?

Chase Bank did finally survive the storm. The entire saga [however] was a lesson in why fear of social media is warranted and yet often misguided. It took only two days between rumors of investigations of bank directors of Chase Bank and its imminent collapse. Social media was definitely a part of this story. Would Chase Bank have collapsed without social media? Probably. But would it have happened so fast and so spectacularly? Possibly not. The only unambiguous lesson from the Chase Bank fallout is that we need to spend a little more time understanding how digital platforms in Kenya interact with offline politics.

Very few countries in Africa have been so deeply entangled in the global panic over the role of technology in politics as they have in Kenya. On one hand, it is only one of four countries in the greater eastern African region (including the Indian Ocean islands) that has had regular changes of government through elections. The economy is growing steadily if not dramatically.

Kenya’s digital boom is part of an effort to diversify an economy that has never had hydrocarbons to rely on.

This is an excerpt from the book Digital Democracy, Analogue Politics: How the Internet Era is Transforming Politics in Kenya by Nanjala Nyabola. It was reprinted with permission from the publisher.

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